Water Charging (South-West)
9:50 pm
Hugo Swire (East Devon, Conservative)
This is one of those extraordinary occasions on which, when we talk about the south-west, the evidence that the south-west has been abandoned by the present Government is clear because no Minister is present to listen to what I am about to say, let alone respond to it. That must mean that, in the extraordinary circumstances in which we find ourselves, Ministers are simply not interested in what is going on in the south-west.
Water and sewerage services are a fundamental household necessity which we too often take for granted. Unlike those in much of the developing world, we in this country are lucky enough to find it unimaginable to be without running drinking water and flushing lavatories. That privilege must, of course, be paid for, but in a manner that is both just and fair. The initial purpose of privatisation back in 1989 was to encourage investment, and, indeed, by 2010 the water industry as a whole will have invested £68 billion to improve services and meet higher drinking-water and environmental standards throughout the country. That is surely irrefutable evidence that privatisation has been beneficial, but the investment comes at a price.
Since privatisation, water and sewerage bills have risen faster than inflation. On average, charges are now 42 per cent. higher in real terms than they were in 1989. It is widely recognised, moreover, that customers of South West Water have been paying disproportionately larger costs than those in any other part of the country. At £497, the current average annual bill in the south-west is more than £150 higher than the average bill throughout England and Wales. That disparity must be addressed immediately.
Before privatisation South West Water had been suffering from a chronic lack of investment, and little had been done to protect the coastal bathing waters of the south-west. During that period, 40 per cent. of the south-west's waste water was being discharged directly into the sea without any treatment. At that time, it was not uncommon for beaches to be closed. Indeed, in July 1990 pollution signs were erected at Leas Foot beach at Thurlestone in Devon warning swimmers not to go into the sea because of raw sewage. The beach was rated the most polluted in Europe in 1985, when levels of sewage were 16 times the maximum allowed and 3,200 times the recommended level. With the advent of privatisation, a century of under-investment had to come to an end.
I take this opportunity to welcome the Minister to the debate.
In 1990, the Government adopted higher water quality standards, as imposed by the European Union. The most significant contributory factor to South West Water's high water charges is, therefore, a "statutory driver", or, rather, the requirement to meet European directives relating to bathing water. In 1991, South West Water thus launched the "clean sweep" programme to intercept 250 crude or inadequately treated sewage discharges to the marine environment and to improve one third of the bathing waters in England and Wales while meeting directive compliance. South West Water has invested more than £1.5 billion in the programme over the past 16 years.
There are 144 designated bathing waters in the South West Water area, which is about one third of the total in England and Wales. Ten years ago, only 51 per cent. of designated bathing waters in the region complied with the EU guideline standard, but following a large amount of work and investment, there has been a dramatic change; so much so that the 2007 "Good Beach Guide" stated that
"the South West is the top performing region in this year's guide".
Malcolm Bell, the excellent director of South West Tourism, has also stated:
"Without Clean Sweep, the tourist industry would have been destroyed."
According to a South West Tourism survey in 2005, 15 million people visit the south-west each year; this is the highest rate of domestic tourism in the UK. The industry is predicted to grow by 39 per cent. over the next decade, a factor which will inevitably put increasing pressure on the south-west to maintain its beaches and coastline in a pristine state. Twenty years ago, the south-west had a serious problem that it needed to confront: the sea was badly polluted, the region's beaches had a reputation for being dirty, and the area was struggling to attract visitors. Now, as well as the large number of tourists who flock to the south-west each year, the area is host to a number of major surfing events, with surfers from all around the world visiting the region. In addition, Fistral beach at Newquay is set to host the 2010 lifesaving world championships, involving more than 6,000 competitors from 50 countries. To secure an event such as this, it was of very great importance that the water was of the highest quality.
There is certainly a pride within the region that compliance with mandatory bathing water standards in England has increased steadily from 89.9 per cent. in 1998 to a record level of 99.5 per cent. achieved in 2006, but this pride is often tinged with bitterness and resentment. While visitors from all over the country, if not the world, come to enjoy the now clean seas and beaches of the region, the bill payers of the south-west are forced to pay for it. Does the Minister think that that is acceptable?
Oliver Letwin (West Dorset, Conservative)
As my hon. Friend knows, I, too, have constituents who face such charges. Surely the point is that it is not possible to justify this extra charge for what is really a national responsibility, the cost burden of which should be spread across the nation.
Hugo Swire (East Devon, Conservative)
My right hon. Friend shows his commitment to this subject by being present on the evening of his birthday. Without his support, I do not think we would be shifting policy in the direction we want. My right hon. Friend has been a champion of equalisation and fairness for South West Water payers for a long time, and I think he will be pleased with what I have to say.
Residents and visitors alike are reaping the benefits of almost two decades of environmental investment. That investment, however, has meant customers paying a premium on their water and sewerage bills. The south-west is ringed by 30 per cent. of the nation's bathing beaches yet is inhabited by just 3 per cent. of the population. A small number of people are therefore paying for the cleanliness of what is a national resource. This imposes a significant burden on a small percentage of the population, a large proportion of whom are pensioners living on low fixed incomes. In addition, there are areas of significantly high deprivation. Low wages and high living costs are a characteristic of life in Devon, while Cornwall's economy is the least productive in the UK, and the county has some of the most deprived areas of the country.
By 2010, it is expected that 12 per cent. of customers nationally will face water and sewerage bills that exceed 3 per cent. of their disposable income before housing costs. In the south-west, however, 30 per cent. of customers will be in that position. Customers with such bills are understandably considered to face affordability problems. How can the Minister justify those shocking figures?
Motion lapsed (
Motion made, and Question proposed, That this House do now adjourn. —(Mr. Frank Roy.)
Hugo Swire (East Devon, Conservative)
This year and next year will see South West Water investing yet another £10.5 million in its "clean sweep" project and although the price rises that it has submitted to Ofwat for the forthcoming price review are lower than those of any other company, customers in the south-west will still be paying the highest bills in the country.
Despite the fact that the flooding of 2008 affected water cleanliness, 97.8 per cent. compliance with the EC water directive's mandatory standards for bathing waters was still achieved. However, this still represents only 79.8 per cent. of the more stringent guideline standards, which indicate excellent bathing water. The Environment Agency expects water companies to progress projects to meet EU directives and has set out a national environmental programme—a programme of actions for environmental improvements that water companies should undertake to meet their environmental obligations. Indeed, in November 2007, the then Minister for the Environment, Mr. Woolas, stated:
"We must go further, to prepare for the more stringent bathing water quality standards which come into effect by 2015."
Does the Under-Secretary suggest that South West Water prices would increase to achieve that?
The current bathing water directive will be repealed in 2013 by the EC water framework directive. The cost of delivering the water framework directive is not yet understood, although it is widely anticipated that there will be a need for further major capital investment by water companies both within this coming pricing period and subsequently.
In addition to compliance with directives, we also must take into consideration changing meteorological circumstances. Climate change is becoming an increasing concern and one that must be taken into account when formulating future policies. During the summer of 2008, large parts of our region had 150 per cent. more rainfall than normal. The rain was also more constant, as opposed to coming in short, intense storms. That meant that the ground was saturated for longer periods, causing more urban run-off and agricultural pollution in streams and rivers. That presented a significant challenge to South West Water in protecting bathing water quality around the peninsula. Residents of the south-west alone cannot be expected to continue to pay for the upkeep of these beaches if maintaining our environment becomes more difficult and more expensive.
The Government have certainly given some clear indications that they wish to see progress towards a time when all households are metered. Figures from the Environment Agency show that homes in the region with water meters consume as much as 30 litres of water per person per day less than those without meters. Indeed, homes with water meters in the South West Water area pay an average of £397 a year, whereas those without a meter have average bills of £686. More than 60 per cent. of homes and businesses in the South West Water area have their water supply metered, and South West Water has said that 70 per cent. of homes in the region will be on water meters by 2010 and 82 per cent. will be by 2015. Although that may play a part in reducing costs, if those in the south-west continue to have to pay indirectly for ever-more stringent EU directives on bathing water for the enjoyment of others, there will continue to be an injustice. Surely the Minister would agree on that point.
Ministers gave some hope that this blatant and outrageous inequality would be addressed when they announced the Walker review into water charging earlier last year. The review is examining the current system of charging households for water and sewerage services, assessing the effectiveness and fairness of current and alternative methods of charging while looking at social, economic and environmental concerns. I understand that Anna Walker has said that she is committed to understanding people's concerns over rocketing charges, particularly in the current economic climate. I would hope that she pays particular attention to the south-west, where residents have been facing extortionate charges long before the recession began.
A ministerial statement that accompanied the Government's new water strategy for England, "Future Water", which announced the review, stated:
"Over the last two decades we have made great improvements to water quality in the environment."—[ Hansard, 7 February 2008; Vol. 471, c. 80WS.]
Although that is indeed an achievement, it must not be forgotten that the majority of the burden of achieving that has been borne by the water customers of the south-west.
In the Walker review's call for evidence document, it is apparent that during consultations the view emerged by a very considerable margin that usage was the fairest way to charge for water. Is that an opinion that the Minister shares or does he believe that it is acceptable for residents of the south-west to pay extra? Many respondents in the south-west resent how much they are paying for their water services. Indeed, the document states:
"Questions of affordability appear to have been most acute in regions where water bills are relatively high and incomes relatively low, such as the South West and Wales."
The original review timetable stated that an interim report was due in spring, with a final report to be published later this year. Now, however, owing to the election purdah period, there is no way that even an interim report will appear until after
In November 2009, Ofwat is to finalise the new limits on prices for the period 2010 to 2015. A tight, difficult time scale would be required were Ofwat to be able to take the Walker review into account. The Minister of State, Jane Kennedy, who has responsibility for farming and the environment, has stated that
"the Walker review will be significant in informing us how to take forward our policies on metering and charging, so we await Anna Walker's findings with interest."—[ Hansard, 6 November 2008; Vol. 482, c. 344.]
Will the Under-Secretary confirm that Ofwat's pricing review will be able to take the Walker review's findings into account, or will the review simply prove to be a pointless exercise that will offer no substantial help to people in the south-west?
The consultation process associated with the Walker review has certainly proved useful in that a wide range of opinions on the matter have been heard. In particular, at a water charging review workshop in London on
I advocate that the west country's popular beaches should be treated as the national asset that they are, paid for by the nation. National assets such as national parks, areas of outstanding natural beauty, sites of special scientific interest and UNESCO world heritage sites, such as the Jurassic coast in my constituency and that of the my right hon. Friend Mr. Letwin, benefit UK tourism and the economy while visitors from all over the country benefit from our beautiful beaches and clean water. It is simply wrong that only 3 per cent. of the population should have to pay to maintain that.
Government intervention is required in order to equitably and effectively address the problem. The Leader of Her Majesty's Opposition, my right hon. Friend Mr. Cameron, has himself criticised that disparity and pledged to take action to address it. While holidaying in north Cornwall last July, he said,
"I understand the unfairness that people feel in the South West that they are paying a lot of money so that there are clean beaches for people like me from Oxfordshire to come and play on."
In fact, the shadow Secretary of State for Environment, Food and Rural Affairs, my hon. Friend Nick Herbert, has confirmed to me personally that such is the importance of the issue that he is urgently looking into redressing it. He has said:
"In some cases, where big investment decisions need to be made which might impact heavily on one small area but might provide wider benefits, we need to look at the way in which they are financed."
That, therefore, is exactly what I have been doing.
The residents of the south-west have paid too high a price for too long and I am proposing a radical new solution that is workable, effective and fair, and whereby environmental standards are maintained, if not improved, but whereby a small number of customers are no longer penalised. Projects that are deemed to be of national importance must not be paid for by one small group of people; instead, that factor must be stripped out of charges. I am proposing an environmental equalisation mechanism that would equably spread the burden of the upkeep of our environment. If the "clean sweep" burden were to be shared equally among all English customers, the South West Water average bill could be reduced by approximately £75 to £379 while customers in other regions would see their bills increase by just a negligible sum.
At £379, South West Water's charges would be at their lowest level since 2002, in real terms. On the basis of the company's final business plan submission, its bills in 2015 would be the lowest since 1999 in real terms. With such a scheme we will have achieved what the people of the south-west have wanted and deserved for so long, finally solving a problem over which the Government have dithered and delayed.
The South West Water area spans 4,300 square miles and has the highest ratio of coastline to land of any region served by any water company in England and Wales. Change is required to address the clear disparity in water charges, and that change should require the whole country to share the burden of upkeep of a national treasure that is available for all to enjoy.
We have lived with that inequality for far too long. In the remaining time left to the Government, they could still redress it. If not, an incoming Conservative Government will do so.
Huw Irranca-Davies (Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs; Ogmore, Labour)
I congratulate Mr. Swire on securing this important debate. I apologise to him and to you, Mr. Deputy Speaker, for arriving a little late. I have great respect for the House and for the Chair, so there is no excuse. It was my fault and I shall try to do better.
I missed the first minute and a half, but I congratulate the hon. Member for East Devon on securing a timely debate. Earlier today I met a cross-party delegation of Members to discuss water affordability in the south-west. The hon. Gentleman was not part of the delegation, which was led by my hon. Friend Linda Gilroy. Those Members have met me before and they have advocated ceaselessly and tirelessly on behalf of their constituents. They have been championing the issue with diligence for some time, so I am glad that the hon. Gentleman is rallying to the cause.
What is clear is that there is broad consensus in support of the Government's vision of fair, affordable and cost-reflective water charging that incentivises environmentally responsible behaviour while protecting vulnerable groups. The challenge is how we achieve that vision not just in the south-west, but across the country. I understand that the hon. Gentleman and his colleague on the Bench behind him are not content—it seems—to await the outcome of Anna Walker's report. When Anna Walker visited the south-west, my hon. Friends Alison Seabeck, Andrew George and others met her to discuss matters and to listen to her. I understand that she will be going back to meet them again. I am sure that the hon. Member for East Devon will not fail on that occasion and that he will meet Anna Walker, listen to what she has to say and put his views to her so that her review can make considered, timely and measured recommendations for a way forward.
I honestly forget which Government brought in water privatisation, but the correct way forward must be to look at the situation in a proper and considered way.
Hugo Swire (East Devon, Conservative)
Had the Minister been in the Chamber at the outset of the debate, he would have heard me defend privatisation, which heralded a mammoth wave of new investment in water companies up and down the UK.
Huw Irranca-Davies (Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs; Ogmore, Labour)
Privatisation has indeed driven up standards in different ways in different areas across the country and has led to a wide variety of performance—but good performance—among many companies, but that situation was not fixed at the moment of inception of privatisation. We did not know then about the long-term legacy for the people of the south-west. However, there may be a way forward and, even though the hon. Gentleman tempts me, I shall not pre-empt—as he did—the findings of Anna Walker's review. It will look at the evidence and will recommend dispassionate and carefully considered ways forward.
We set out our vision in "Future Water: the Government's water strategy for England", which we published in February 2008. It sets out how we want the water sector to look by 2030, taking the long-term view, and the steps needed to take us there.
An initiative announced in "Future Water" was an independent review of charging for household water and sewerage services. Anna Walker was thus appointed last August to lead the review, which issued a call for evidence last November—I assume that the hon. Member for East Devon has made a submission—and five regional workshops were held in late 2008 and early 2009 to discuss the issues, to develop an evidence base, which he will agree is important, and to explore solutions to the problems identified.
One of those workshops was held in Plymouth, as I mentioned, and I am pleased that a number of hon. Members took the opportunity to participate. They will be delighted to know that Anna Walker has bravely pledged to return to the south-west after publication of the interim report shortly, to discuss her emerging recommendations.
The review is looking at a range of very challenging issues, including the fairness of current methods of charging for water, the appropriate pace of metering in areas of water stress, the effectiveness of different types of tariff, affordability concerns and the needs of vulnerable customers.
The interim report is expected in June, and the final report is expected later in the year. I hope that the hon. Gentleman will not be too disappointed if I do not pre-empt the report and what it might recommend in replying to him this evening. However, I am encouraged by the feedback that I have heard from people who have met Anna Walker and attended the roadshows, given the way that she has listened and taken on board the concerns, including those in the south-west, and is serious about addressing some of the issues she has identified.
I shall turn to one aspect of the review—charging and metering. A key element of the Walker review is the fairness of different methods of charging for water. About one in three households in England and Wales is currently metered, although the figure is around 60 per cent in the south-west, as the hon. Gentleman will know. The rate of metering is increasing by a little over 2 per cent. per annum, mainly because customers are opting for meters to reduce their bills. However, many households are still paying for their water based on the 1970s rateable value of their home. That does not bear any relation to the amount of water used by the household and offers no incentive to use water wisely.
Metering is the usual method of charging for water in most countries. We said in "Future Water" that we believe that near-universal metering will be needed in areas of water stress by 2030, and the Walker review will advise on the appropriate pace of metering . Outside areas of high water stress, the case for meters is not so clear cut, and we will see what Anna Walker says. Furthermore, as more and more householders switch to meters because they can save money, the bills rise for those left behind who do not switch, especially for large families on low incomes.
Let me turn to affordability, which is a key element of the Walker review, as I know from my discussions with Anna Walker. Of course I recognise, as I hope we all do, that affordability is now a real issue for low-income households with a high essential use of water and for those living in areas with high water bills—notably, the south-west.
Ofwat—the independent economic regulator of the water industry—has a duty to protect customers, including those on low incomes. The Government look to Ofwat to ensure that bills are no higher than they need to be, but South West Water's customers pay more for their water and sewerage services than other customers. That reflects not only the historical issues, but the substantial investment that South West Water has indeed undertaken since privatisation, the cost of which has fallen to the company's customers.
Identifying the problems does not mean that there are easy solutions to the question of who pays. The Walker review is looking at that issue. However, none of the ideas previously mooted fully solves the problem in the interests of all customers. The Government have already taken action where there might be a risk to people's health because of difficulty in paying water bills. In fact, it was this Government who legislated to ban the disconnection of water supplies because customers cannot afford to pay their water bills.
We have also put in place protection for vulnerable customers on meters through the WaterSure tariff, which caps the bills of households on means-tested benefits with three or more children under the age of 19 or a prescribed medical condition that requires a high use of water, at the average for that company. That encourages customers not to cut back on their use of water because of worries about the size of their bills. Some of those customers cannot reduce the amount of water that they use.
The Walker review is considering whether the WaterSure scheme should be widened. It is also looking into whether more specific, closely targeted assistance is needed for low-income households in areas where bills are relatively high, such as the south-west. I am sure that the hon. Member for East Devon will be aware of the South West Water pilot study. It looked at ways to target and assess the effectiveness of water affordability assistance in the form of benefit entitlement checks, meter installation, water efficiency devices and advice to low-income households in the south-west region. I am pleased that South West Water has taken the initiative and is looking to provide that service to 7,500 of its customers, concentrating on those who are already in debt, and those who have difficulty paying their bills. Those measures can reduce such customers' bills by about £41 a year, and I welcome South West Water's efforts in that regard.
The House is aware that Ofwat's 2009 review of water price limits—periodic review 2009, or PR09—is under way. It will determine water price limits for the period 2010 to 2015. The Environment, Food and Rural Affairs Committee is undertaking an inquiry into PR09 alongside its pre-legislative scrutiny of the Government's draft Flood and Water Management Bill, which we published last month. Water companies submitted their final business plans to Ofwat in April. South West Water proposes an average increase in bills of 1.2 per cent. per annum, plus inflation, for the period 2010 to 2015.
South West Water's final business plan includes proposals for a trial of rising block tariffs, which reward bill payers for saving water, and an extension of the company's WaterCare programme to help the customers who are most in need. Ofwat will now scrutinise those plans, and those of other water companies, before issuing draft determinations of water price limits for comment in July. Ofwat will issue the final determinations in November.
Oliver Letwin (West Dorset, Conservative)
If the Walker review proposes an equalisation scheme similar to that proposed by my hon. Friend Mr. Swire, would the Minister, in principle, be willing to adjust the price formulae arrived at through the current price review?
Huw Irranca-Davies (Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs; Ogmore, Labour)
I am pleased to say that I rule nothing in and nothing out until we see the result of Anna Walker's deliberations, whereas the right hon. Gentleman seems to suggest that he has one course of action in mind, regardless of any repercussions or implications for other bill payers. We will consider the Anna Walker review carefully. We will comment on its interim findings to see on what issues we are in agreement. Hopefully, we will agree with all of it. We certainly want to take forward her recommendations seriously, and in a timely fashion, but unlike the right hon. Gentleman, we do not want to pre-empt her review. It would not be fair to Anna Walker for the Government to predetermine the outcome of her review.
Hugo Swire (East Devon, Conservative)
I would like a simple yes or no: does the Minister not agree that it is manifestly unfair for 3 per cent. of the country's population to go on paying for 30 per cent. of the nation's beaches and clean water?
Huw Irranca-Davies (Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs; Ogmore, Labour)
We would not have set up the review if we thought that there were no water affordability problems to solve. It took this Government to set up the review, and we did so in a serious and focused way. I hope that the hon. Gentleman will avoid making pre-emptive policy decisions, such as those that he put forward tonight. They would pre-empt an independent, careful and thoughtful review, which has been taken out on the road and which has gathered evidence from around the country. To the best of my knowledge, it has not received input from the hon. Gentleman or the Conservative Front-Bench team as yet, but I am sure that it will do when Anna Walker presents her interim review. Knee-jerk reactions may or may not have merit—I rule nothing in, and nothing out—but I am content to wait for Anna Walker's interim report, and will then comment on it. It is in expert hands; I know of the evidence that she has gathered, and know of the response that she has had from people around the country, including in the south-west.
I may have arrived a little late for the debate tonight, for which I have apologised to you, Mr. Deputy Speaker, and to the hon. Member for East Devon and his Front-Bench team, but neither I nor my hon. Friends have come late to the overall debate about affordability in the south-west and other issues that resonate around the country, which the Government take extremely seriously.
I welcome the hon. Gentleman's contribution to the debate. I strongly urge him to submit his views to Anna Walker's review, but not to pre-empt it. Surely the purpose of an independent review is to produce good, solid recommendations unimpaired by the slight bias of policy on the hoof, or politics on the hoof. Let us see what Anna Walker produces. I have every confidence in her. The Government will respond in due course to her and take forward the recommendations as we see fit.
As has been pointed out to me not only in the hon. Gentleman's debate tonight, but regularly in meetings with cross-party colleagues who been advocates on the subject, there are issues in the south-west and elsewhere in the UK to be dealt with. That is why the Government commissioned an independent review.
Question put and agreed to.
House adjourned.